Question

1) In a market economy, why must the government play a primary role in dealing with pollution, vaccinations, and medical research? A) B) The government has historically led in these areas, so the private sector is afraid to interfere. Citizens do not trust the private sector enough to allow private companies to do work in these areas. The private sector has made tremendous mistakes in these areas, so the government has taken over. These are critical needs that do not always carry enough potential for profit to motivate the private sector to invest C) D)

Answer 1

Due to the presence of positive externality there would be huge undersupply of these services if they are to be provided by the government.

These services has positive externality meaning if one person gets the benefits even if he doesn't pay. Hence if the profit is the primary reason then it would result in undersupply of these goods and even if the price is set at high enough level people won't pay because most of these are public goods and even if they don't pay they will be able to enjoy the benefits.

Hence option d is the correct option here.